Ethereum (ETH) bearish despite undergoing $700M short liquidations — here’s why?

YEREVAN (CoinChapter.com) – Ethereum, the second-largest cryptocurrency by market cap, saw its token ETH price jump 5.5% on June 6 in a copycat bounce following Bitcoin’s analogous move. As a result, while traders liquidated nearly $700 million in short positions, the digital asset traded at over $1,890 in the Asian-Pacific session but threw bearish hints at investors.

Ethereum (ETH) technicals feature a Pennant

In detail, the ETH/USD price action formed a bearish Pennant, best visible on the four-hour chart. The pattern represents a consolidation period after a large movement in a given asset’s price. It features two converging trendlines enclosing the price action and lowering the swing as the formation progresses.

The Pennant is a continuation pattern. Thus, it vouches to restore the bias preceding the consolidation. Ethereum token dropped 25% before forming the Pennant. So, if the setup pans out, traders can expect a similar drop, pinning the target price at approximately $1,060.

Also read: Ethereum (ETH) price rallies but experts are not convinced.

Meanwhile, the Network saw the largest short position liquidation rate in the last three years.

$700M worth of short positions liquidated

According to the analytical platform CryptoQuant, the previous 24 hours set a three-year record for ETH in single-day short liquidations. Traders liquidated $698 million, with 99.5% of the positions being short. In detail, short positions mean that traders betted against Ethereum, selling the token at a high price and hoping to buy up when the value decreases.

Also read: Twitterati attacks Ethereum, "depressed" co-founder Vitalik Buterin – here's why.

Thus, the overall sentiment among traders was bearish. However, the upcoming merge test could boost the traders’ confidence in the asset.

Will the merge test help ETH price?

Ethereum has been teasing investors with a full switch to proof-of-stake (PoS) consensus for years. However, given the Network’s sheer size, the merge has been long in the making.

According to Tim Beiko, the protocol support executive at Ethereum Foundation, two more testnets will come before the final deployment. Moreover, traders can expect one of them to come before June 12.

In case folks didn’t read the blog post: no. We have two more testnets to go before mainnet and there won’t be a mainnet date sent before both of these have successfully transitioned 🐼 https://t.co/FI2zsIKIU2

— Tim Beiko | timbeiko.eth 🐼 (@TimBeiko) June 6, 2022

Also read: Bitcoin below $30K but a bull run might be imminent — here's why.

Furthermore, during his ETH Shanghai Web 3.0 Developer Summit address, Ethereum chief Vitalik Buterin commented that the final shift could come in August 2022.

The possible Network transition in 2022 could help change Ethereum’s bearish sentiment among traders. However, the digital asset price depends greatly on Bitcoin’s price action and the broader market conditions.